Big Banks on Track to Meet Basel Capital Rules Ahead of Time

The world's top banks have made
big strides towards meeting tougher capital rules several years
before full compliance is required, global regulators said on
Tuesday.

Big strides towards meeting tougher capital rules several years
before full compliance is required, global regulators said on
Tuesday.

The new rules known as Basel III were the world's main
regulatory response to the 2007-09 financial crisis that forced
governments to rescue undercapitalized lenders.

The Basel Committee of banking supervisors from nearly 30
countries, which devised Basel III, said the world's top 101
banks would have needed an extra 208.2 billion euros ($270
billion) had Basel III been in force in June 2012 - 176 billion
euros less than in its previous study in December 2011.

Basel III is being phased in over six years from January
2013 but the latest study shows the banks could meet the targets
well ahead of time, strengthening them in the face of any future
market turmoil.

Markets and regulators have been putting pressure on banks
to meet Basel III well ahead of the end-2018 deadline.

The remaining shortfall includes capital surcharges that the
very biggest banks must hold from 2016 on top of the Basel III
minimum.

The European Banking Authority said a study that it carried
out alongside Basel's exercise showed the largest European banks
would have needed to raise 112.4 billion euros to meet the 7
percent minimum capital buffer last June.

This means that over half the global shortfall identified by
Basel is at 44 top banks in the European Union.

The Basel Committee said the average core capital buffer for
the top banks last June was 8.5 percent.

Profits after tax and before dividend distribution at the
top 101 banks between July 1, 2011 and June 30, 2012 was 380
billion euros, meaning the capital gap could be plugged without
having to raise fresh capital on the market.

Basel also said the top banks had an average net stable
funding ratio (NSFR) of 99 percent. The ratio requires banks to
have enough cash or cash like instruments for a up to a year to
survive shocks.